IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11196.html
   My bibliography  Save this paper

Quantifying Okun’s Leaky Bucket: The Case of Progressive Childcare Subsidies

Author

Listed:
  • David Koll
  • Dominik Sachs
  • Fabian Stürmer-Heiber
  • Hélène Turon

Abstract

We formalize and estimate the dynamic marginal efficiency cost of redistribution (MECR) in the spirit of Okun’s “leaky bucket” to compare the MECR of an income-contingent childcare subsidy program and of the income-contingent tax and transfer schedule. We set up a dynamic structural model of heterogeneous households choosing their childcare demand and maternal labor supply. Allowing for the availability of informal childcare and for consumption of leisure, we estimate this model within the German context. Our analysis identifies two competing forces. (i) Labor supply responses increase the MECR of the childcare subsidy relative to the tax and transfer system. (ii) Child development effects decrease the MECR of the childcare subsidy relative to the income tax. We show that, under most plausible assumptions on the long-term returns to childcare attendance for children growing up in households of different incomes, progressive childcare subsidies are the more efficient redistribution tool.

Suggested Citation

  • David Koll & Dominik Sachs & Fabian Stürmer-Heiber & Hélène Turon, 2024. "Quantifying Okun’s Leaky Bucket: The Case of Progressive Childcare Subsidies," CESifo Working Paper Series 11196, CESifo.
    • Handle: RePEc:ces:ceswps:_11196
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11196.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard Blundell & Monica Costa Dias & Costas Meghir & Jonathan Shaw, 2016. "Female Labor Supply, Human Capital, and Welfare Reform," Econometrica, Econometric Society, vol. 84, pages 1705-1753, September.
    2. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2011. "Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins," American Economic Review, American Economic Association, vol. 101(3), pages 471-475, May.
    3. Alexander Bick, 2016. "The Quantitative Role Of Child Care For Female Labor Force Participation And Fertility," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 639-668, June.
    4. Tarjei Havnes & Magne Mogstad, 2011. "No Child Left Behind: Subsidized Child Care and Children's Long-Run Outcomes," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 97-129, May.
    5. Saez, Emmanuel & Stantcheva, Stefanie, 2018. "A simpler theory of optimal capital taxation," Journal of Public Economics, Elsevier, vol. 162(C), pages 120-142.
    6. Mikhail Golosov & Michael Graber & Magne Mogstad & David Novgorodsky, 2024. "How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(2), pages 1321-1395.
    7. Mikhail Golosov & Aleh Tsyvinski & Nicolas Werquin, 2014. "A Variational Approach to the Analysis of Tax Systems," NBER Working Papers 20780, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Koll & Dominik Sachs & Fabian Stürmer-Heiber & Hélène Turon, 2023. "Equity and Efficiency of Childcare Subsidies: A Dynamic Structural Approach," CESifo Working Paper Series 10793, CESifo.
    2. Findeisen, Sebastian & Sachs, Dominik, 2015. "Designing efficient college and tax policies," Working Papers 15-09, University of Mannheim, Department of Economics.
    3. Hellwig, Christian & Werquin, Nicolas, 2022. "Using Consumption Data to Derive Optimal Income and Capital Tax Rates," TSE Working Papers 22-1284, Toulouse School of Economics (TSE), revised Jul 2024.
    4. Albert Jan Hummel, 2021. "Unemployment and tax design," Tinbergen Institute Discussion Papers 21-061/VI, Tinbergen Institute.
    5. Dominik Sachs & Sebastian Findeisen, 2016. "Optimal Financial Aid Policies for Students," 2016 Meeting Papers 1421, Society for Economic Dynamics.
    6. Albert Jan Hummel, 2021. "Unemployment and Tax Design," CESifo Working Paper Series 9177, CESifo.
    7. Findeisen, Sebastian & Sachs, Dominik, 2017. "Redistribution and insurance with simple tax instruments," Journal of Public Economics, Elsevier, vol. 146(C), pages 58-78.
    8. Hassani Nezhad, Lena, 2020. "Female Employment and Childcare," IZA Discussion Papers 13839, Institute of Labor Economics (IZA).
    9. Stefanie Stantcheva, 2020. "Dynamic Taxation," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 801-831, August.
    10. Attanasio, Orazio & Low, Hamish & Sánchez-Marcos, Virginia & Levell, Peter, 2015. "Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply," CEPR Discussion Papers 10732, C.E.P.R. Discussion Papers.
    11. Roman Horvath & Ali Elminejad & Tomas Havranek, 2020. "Publication and Identification Biases in Measuring the Intertemporal Substitution of Labor Supply," Working Papers IES 2020/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2020.
    12. Monica Costa Dias & Robert Joyce & Francesca Parodi, 2019. "The gender pay gap in the UK: children and experience in work," Carlo Alberto Notebooks 594, Collegio Carlo Alberto.
    13. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    14. Dominik Sachs & Aleh Tsyvinski & Nicolas Werquin, 2020. "Nonlinear Tax Incidence and Optimal Taxation in General Equilibrium," Econometrica, Econometric Society, vol. 88(2), pages 469-493, March.
    15. KITAO Sagiri & MIKOSHIBA Minamo, 2022. "Why Women Work the Way They Do in Japan: Roles of Fiscal Policies," Discussion papers 22016, Research Institute of Economy, Trade and Industry (RIETI).
    16. Yongsung Chang & Yena Park, 2021. "Optimal Taxation with Private Insurance [Uninsured Idiosyncratic Risk and Aggregate Saving]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 2766-2798.
    17. Orhan Erem Atesagaoglu & Hakki Yazici, 2021. "Optimal Taxation of Capital in the Presence of Declining Labor Share," CESifo Working Paper Series 9101, CESifo.
    18. Christine Ho & Nicola Pavoni, 2020. "Efficient Child Care Subsidies," American Economic Review, American Economic Association, vol. 110(1), pages 162-199, January.
    19. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2020. "Child Care Subsidies, Quality, and Optimal Income Taxation," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 1-37, November.
    20. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1789-1891, Elsevier.

    More about this item

    Keywords

    female labor supply; childcare; family policies; fiscal externalities; dynamic discrete choice; redistribution;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_11196. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.